Buyer Tips: A walkthrough of the Mortgage Process
Whether you are buying a new home or refinancing a mortgage, there are a series of steps you need to follow before closing. While getting a mortgage may appear a complicated, daunting task, a basic understanding of the mortgage process might make it easier. These buyer tips will help get you started and provide you with a walkthrough of the mortgage process.
Getting Pre-Qualified and Pre-Approved
The first steps to obtaining a mortgage are getting pre-qualified and pre-approved. The pre-qualification process involves a lender estimating the amount the buyer, the person applying for a loan, is able to afford, and how much the lender, such as a bank or loan institution, is willing to finance. Pre-approval is when the lender preemptively commits to a maximum amount. The pre-approval is strictly a theoretical number, and no binding agreement has been made at this point, so it’s good to know that you are still able to shop around with different lenders before committing.
Applying for the Mortgage or Home Refinancing
In this step, the buyer provides the lender with financial information, such as W2 forms, pay stubs and bank statements. Here a loan officer, a person that acts as an intermediary between the buyer and the lender, tries to find the type of mortgage or refinance loan would be the most appropriate to the buyer’s financial situation.
This is also where the buyer is given the opportunity to lock into an interest rate, which will be reserved within a specific timeframe. Sometimes the buyer will be required to pay points in order to get a lower rate. When the loan type and interest rate is finally determined, the buyer will sign the associated forms and be presented with the lenders Good Faith Estimate, which will detail an estimated total cost for the entire loan process.
The application rarely takes more than an hour to get through once the buyer has a good understanding of what he wants to do.
Processing and Underwriting a Loan
With the application completed, the processing stage begins. This is where the lender verifies the buyer’s financial status, credit reports are reviewed and the property gets properly appraised to determine the final loan amount.
After this is settled, the mortgage loan is reviewed by an underwriter for final approval. The underwriter serves as a secondary verification of the information collected in the loan package. He or she gives the confirmation that all loan requirements are met and that the buyer is qualified for the loan. This usually takes between one and two weeks.
Closing the Loan
As soon as the underwriter approves the loan the final date for closing is decided. During the closing, the title to the home is transferred to the new property owner, and a Settlement Statement is provided. This statement is similar to the Good Faith Estimate and is a complete list of the fees and charges to all parties in the transaction
Different types of mortgage usually require different circumstances, and can vary a great deal in time from pre-qualification to completion. To get a full explanation of the individual and necessary processes involved, discuss your plans with a loan officer. With this understanding, it’s easier to maintain protection over your finances as a consumer in the mortgage market.